French communications company Vivendi and its Canal Plus TV unit on Sunday edged closer to their acquisition of Seagram for about $33 billion in stock. The companies said in a joint statement they hoped to formally announce a deal as soon as Tuesday.
A union of the three companies would join Seagram’s entertainment assets, which include Universal Pictures, with the growing telecommunications and Internet infrastructure being developed by Vivendi.
“The negotiations initiated by Vivendi with Seagram and Canal Plus, which could result in an alliance of the three firms, have now entered their final stage,” the companies said.
Both companies were expected to vote on a deal at separate meetings today. The boards held sessions on Sunday and the Seagram board also met on Saturday for an informational update, said sources close to the talks.
“We’re not done yet. We still have some issues that need to be addressed,” said one source who spoke on condition of anonymity. The source did not specify the nature of those issues.
Representatives of Vivendi and Canal Plus continued over the weekend to conduct due diligence on Seagram’s operations, the sources said.
The deal would mark a milestone in Vivendi’s quest to transform itself from a bulky utilities conglomerate into a leading-edge global media player. The company plans to spin off its utility assets this summer.
Vivendi will take another step in that direction on today when the company launches its Internet portal Vizzavi with British partner Vodafone AirTouch. First announced in January, Vizzavi will offer Internet access and online services to the group’s combined 70 million mobile phone users and pay TV subscribers in Europe.
Vivendi also controls France’s No. 2 telecoms operator Cegetel, publisher Havas, film group Pathe and a stake in Web provider AOL France.
Vivendi boss Jean-Marie Messier, widely credited for the company’s transformation, remained in France over the weekend to prepare for the Vizzavi launch. His counterpart at Seagram, Edgar Bronfman, was in New York.
To be called Vivendi Universal, the combined entity would have revenues of some $65 billion, market capitalization of $100 billion, and would be a force to be reckoned with for rivals like the proposed merger of AOL and Time Warner
The deal is expected to value Seagram at $75 to $79 a share in stock. The transaction would also call for Vivendi to assume some $7 billion in Seagram debt.
Shares of Seagram closed Friday at 61 7/16 on the New York Stock Exchange.
Vivendi is expected to swiftly sell Seagram’s beverage business. A sale of the business is expected to fetch around $6 billion to $7 billion.
Sources close to the talks said the Vivendi shareholders are likely to receive 59% of the new group. Seagram shareholders would get about 29% and 12% about go to Canal Plus.
Bronfman, who concentrated on building Seagram into an entertainment company, is expected to be named vice chairman on the combined company with a continued role in the Hollywood aspect of the business.
Messier will run the combined entity. Seagram will have five of 18 board seats and the Bronfman family, which bought the company in 1928 from Joseph Seagram and Sons, will be the biggest shareholder with 8%.
The prospect of a takeover has been well-received by Seagram shareholders.
“We would be delighted to get $75 in Vivendi stock. We would be very supportive of a deal,” said Rob Lyon, president of Institutional Capital, which owns about 4.6 million shares of Seagram.
In Europe, analysts have taken a more cautious tone, noting the purchase of Seagram’s Universal Studios will not be without risk for Vivendi.
While Seagram shares rose after the companies last week confirmed the discussions, Vivendi shares dived 15% on Wednesday and Thursday as investors fretted over cost and a lack of details. Canal Plus, 49%-owned by Vivendi, had lost 5% by Friday.
Analysts are concerned the deal will dilute Vivendi earnings. A source close to the talks, however, said the proposed deal would dilute Vivendi’s 2001 earnings by less than 10%.